Facts of the Case

The Petitioner, Ambika Traders, a sole proprietorship engaged in the business of metal scrap, was alleged to have fraudulently availed Input Tax Credit (ITC) amounting to approximately ₹83.76 crores over multiple financial years (2017–18 to 2021–22).

A consolidated Show Cause Notice (SCN) was issued by the Respondent covering multiple financial years under Section 74 of the CGST Act, 2017, followed by an Order-in-Original confirming tax demand, interest, and penalties.

The Petitioner challenged the SCN and adjudication order before the Delhi High Court under Article 226 of the Constitution. 

Issues Involved

  1. Whether a consolidated Show Cause Notice covering multiple financial years is permissible under Section 74 of the CGST Act, 2017?
  2. Whether denial of cross-examination and alleged non-consideration of replies violates principles of natural justice?
  3. Whether the writ petition is maintainable despite the availability of an alternative statutory remedy (appeal)? 

Petitioner’s Arguments

  • A single SCN for multiple financial years is not permissible under Section 74 of the CGST Act.
  • The adjudicating authority failed to properly consider replies, violating natural justice.
  • Denial of cross-examination of witnesses vitiates the proceedings.
  • The order suffers from procedural irregularities warranting interference under writ jurisdiction.

Respondent’s Arguments

  • Section 74 permits issuance of SCN for “any period” or “such periods”, thereby allowing consolidation of multiple years.
  • Consolidation is necessary to establish a pattern of fraudulent ITC transactions spanning several years.
  • Replies submitted by the Petitioner were duly considered but lacked substantive defence.
  • Cross-examination is not an absolute right in SCN proceedings.
  • The Petitioner has an effective alternative remedy of appeal.

Court Findings / Order

  • The Delhi High Court held that consolidated SCNs for multiple financial years are valid under Section 74 of the CGST Act.
  • The expressions “any period” and “such periods” indicate legislative intent to allow coverage beyond a single financial year.
  • Fraudulent ITC cases often require examination of transactions across years to establish patterns.
  • The Court found that the adjudicating authority had considered the Petitioner’s replies adequately.
  • Denial of cross-examination does not automatically invalidate proceedings, especially when no prejudice is caused.
  • The writ petition was dismissed, granting liberty to the Petitioner to file a statutory appeal. 

Important Clarifications

  • Consolidated SCN is legally valid in cases involving fraud or continuous transactions.
  • Cross-examination is not an absolute right in GST adjudication proceedings.
  • Writ jurisdiction will not be exercised where effective alternate remedy exists.
  • Courts will not interfere in SCN/adjudication unless there is jurisdictional error or gross violation of natural justice. 

Sections Involved

  • Section 74, CGST Act, 2017 – Determination of tax in cases involving fraud, wilful misstatement or suppression
  • Section 107, CGST Act, 2017 – Appeal provisions
  • Section 122, CGST Act, 2017 – Penalties
  • Articles 226 & 227 of the Constitution of India

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/PMS29072025CW48532025_164115.pdf

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